Paying Billions to Make Trillions

This year could be the beginning of something very lucrative for six European mobile phone giants.

Germany’s Deutsche Telekom, E-Plus, Mannesman D2, Mobilcom/France Telecom, Viag Intercom, Telefonica/Sonera and Debitel/Swisscom each paid the German government about 8 billion euro apiece for access to the next generation of mobile calling in Germany.

The Universal Mobile Telecommunications System (UMTS) will allow mobile phone users to send video, emails, and surf on the Internet from their cell phones at a speed 200 times faster than at present. Analysts predict the number of users will exceed 2 billion by 2010.

For the mobile phone firms in on the action, it could mean a market worth more than 1.1 trillion euro worldwide over the next ten years, according to the UMTS forum, a non-profit mobile phone industry group.

Paying billions to get in

Eager to get in on the ground floor, a number of European companies competed for six frequency licenses that would allow them to build UMTS towers across Germany.

The German government was only to happy to let them, earning more than 50 billion euro from the auction last August. Their European Union partner Great Britain made 38.4 billion euro off their license sale.

Whether all six companies will survive after setting up their networks before the end of the year remains to be seen. Competition is expected to be fierce.

"The market will become more intense and not all six will be able to make money," Viag-Intercom chair Rudolf Gröger told the Frankfurt Allgemeine Zeitung’s sunday edition. He said he expects only four to remain. Mobilcom and its partner, France Telecom, are already in the middle of a fight over the company’s UMTS investment.

Gröger also doesn’t expect the new UMTS cell phones to be around anytime soon. While some mobile phone companies expect to come out with models by the end of 2002, Gröger said his company is likely to wait until the end of 2003, beginning 2004 before introducing a model.

There is another option for consumers desperate to begin sending email videos per cell phone. German mobile phone company E-Plus will introduce the i-mode telephone, a product of its Japanese partner NTT Domoco on March 16.

The new phone also uses next generation mobile phone networks to allow lightning-fast internet access over a color display.